Question
With reference to 1cRating 1d field (template 103 13 Annex IV, column No 50) how the different local rating scales must be treated for consolidated reporting, i.e: If a master scale is available at Group level (e.g. for Pillar III purposes), does the Institution have to adopt it, or it can choose to create an ad hoc master scale? In this latter case, if different rating scales (with different number of grades) are applied within the Group, can the Institution define the number of grades or does it have to contact its competent authority in advance to agree upon the way to define the new scale?
Background on the question
Refer to 18060 19 column description in template 103 13 Annex IV: 1cIt is neither intended nor desirable to have a supervisory master scale. If the reporting institution applies a unique rating system or is able to report according to an internal master scale, this scale is used. Otherwise, the different rating systems shall be merged and ordered according to the following criteria: Obligor grades of the different rating systems shall be pooled and ordered from the lower PD assigned to each obligor grade to the higher. Where the institution uses a large number of grades or pools, a reduced number of grades or pools to be reported may be agreed with the competent authorities. Institutions shall contact their competent authority in advance, if they want to report a different number of grades in comparison with the internal number of grades."
Answer
The “Rating” field (c50, template C103.00 – Annex III Draft ITS on Supervisory Reporting for Institutions for benchmarking the internal approaches (ITS on benchmarking)) shall only be reported if requested in Annex I otherwise this cell shall be left blank. Hence, for High-default portfolio data as of 31 December 2015 no information at rating grade level is requested. For grouping purpose, the same rating scale as reported in the COREP template C 08.02 of Annex I of Regulation (EU) No. 680/2014 shall be used. Accordingly, if the Institution uses a group master scale, it has to be used. If not, the grouping shall be made pursuant to the instructions ‘for c60 of template C 103.00 of Annex of the ITS on benchmarking. DISCLAIMER: The present Q&A on Supervisory reporting is provisional. It will be reviewed after the Implementing Regulation is in force and published in the Official Journal, which may differ from the text of the draft ITS to which this Q&A relates.